Result Update (Q1 FY11) August 03, 2010

India Cements Ltd – MP

CMP Rs105, Target Rs104

– In Q1 FY11, India Cements Ltd (ICL) posted revenue de-growth of 7.4% yoy, below our expectation
of a flat yoy growth. Dismal cement demand-supply scenario in South (95% of ICL market share)
led to a sharp drop in average realization for ICL. Net realisation for the quarter stood at Rs163/bag
down 17% yoy, worse than our estimate of ~12%. The share of central rights income pertaining to
IPL was not considered during the quarter resulting in a lower income from the IPL segment.

– ICL’s OPM nosedived to ~12% v/s 30% in Q1 FY10 (down 18ppts). Depressing operational
performance was on back of lower realization and increase in fuel cost as international coal prices
soared to US$99 (average of the quarter) v/s US$60 in Q1 FY10.

– Reported PAT declined 70% yoy primarily on back of margin contraction. Decline in adjusted PAT
was higher due to foreign exchange translation loss of Rs11.6mn against a gain of Rs21mn a year
ago.

– We value IPL franchise at US$161mn or Rs24/share (adjusting for future outflows) and cement
business at US$65 EV/ton or Rs80/share for FY11E, thereby arriving at a target price of Rs104.

Results table
(Rs m) Q1 FY11 Q1 FY10 % yoy Q4 FY10 % qoq
Net sales 8,828 9,535 (7.4) 9,743 (9.4)
Material costs (1,163) (844) 37.9 (1,541) (24.5)
Personnel costs (630) (516) 22.1 (802) (21.5)
Power and fuel costs (2,751) (2,438) 12.8 (2,610) 5.4
Freight cost (1,838) (1,308) 40.5 (1,908) (3.6)
Other overheads (1,424) (1,566) (9.0) (1,522) (6.4)
Operating profit 1,022 2,863 (64.3) 1,360 (24.9)
OPM (%) 11.6 30.0 (1846 bps) 14.0 (239 bps)
Depreciation (599) (571) 4.9 (616) (2.8)
Interest (298) (385) (22.7) (369) (19.3)
Other income 264 68 289.5 28 838.4
PBT 389 1,976 (80.3) 404 (3.6)
Tax (24) (743) (96.8) (143) (83.2)
Effective tax rate (%) (6.2) (37.6) 3143 bps (35.3) 2915 bps
Exceptional Item (116) 210 - 122 -
Reported PAT 365 1,233 (70.4) 261 39.9
Adjusted PAT 250 1,443 (82.7) 383 (34.8)
Ann. EPS (Rs) 3.5 20.4 (83%) 5.4 (35%)
Source: Company, India Infoline Research

Financial summary
Y/e 31 Mar (Rs m) FY09 FY10E FY11E FY12E
Revenues 34,290 38,054 39,357 47,145
yoy growth (%) 12.5 11.0 3.4 19.8
Operating profit 9,213 8,607 5,901 8,645
OPM (%) 26.9 22.6 15.0 18.3
Pre-exceptional PAT 5,018 3,138 1,316 2,888
yoy growth (%) (34.2) (15.4) (63.2) 119.5

EPS (Rs) 17.8 10.2 4.3 9.4

P/E (x) 7.1 12.3 29.3 13.3
Price/Book (x) 1.0 0.9 0.9 0.9
EV/EBITDA (x) 5.9 6.7 10.3 7.2
Debt/Equity (x) 0.6 0.5 0.5 0.5
RoE (%) 14.8 8.2 3.1 6.7
RoCE (%) 15.2 10.1 5.1 8.4
Source: Company, India Infoline Research
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